As MultiChoice prepares for its agreement with the French media behemoth Canal+, the company is undergoing a major reorganisation.
The Competition Tribunal recently approved Canal+’s acquisition of pay-TV behemoth, MultiChoice for R125 per share, and the deal is almost complete, subject to a few conditions. However, MultiChoice will need to reorganise some of its local operations due to certain legal restrictions.
In particular, the Electronic Communications Act (ECA) uses stringent ownership regulations to restrict foreign ownership of commercial broadcasting services. According to this law, a foreign national cannot have direct or indirect control over a commercial broadcasting licensee. Furthermore, foreigners may make up no more than 20% of a commercial broadcasting licensee’s directors. As a result, this restriction might make Canal+’s plan to buy all of MultiChoice’s issued shares more difficult.
MultiChoice is implementing a new post-merger structure for its South African business to prevent this. Its division that currently possesses the South African broadcasting license and the company that enters into contracts with South African subscribers was separated into a separate legal entity called LicenceCo.
The MultiChoice Group will continue to own the remaining video entertainment assets. On Monday, August 4, MultiChoice announced the structure of this new company to the market.
According to Multichoice: “The reorganisation is specifically designed to ensure that the licensed entities within the MultiChoice group remain compliant with foreign control restrictions under the ECA, thereby preserving the integrity of the company’s broadcasting and signal distribution licences.”
Continuing, MultiChoice South Africa Holdings (MCSAH) is currently in charge of MultiChoice’s operations in South Africa. Through a series of transactions, MultiChoice will sell its stake in the MCSAH group as part of the proposed restructuring. For instance, some shareholders, partners, and subsidiaries of MultiChoice will subscribe for different classes of LicenceCo shares. This comprises 13th Ave Investments, MultiChoice’s Workers Trust, Identity Partners Itai Consortium (IPIC), and Phuthuma Nathi Investments (PN).
In actuality, MultiChoice will sell off 26% of its economic stake in LicenceCo and 15% of its financial stake in Orbicom, which is its authorised signal distributor and owner of licenses for radio frequency spectrum and electronic communications, BrandSpur entertainment and lifestyle news desk reports.
The following will be the shareholders’ economic interests and voting rights in the business after all participating organisations have purchased LicenceCo shares:
MultiChoice and Canal+ are almost done with their deal, as the Competition Tribunal has granted conditional approval and the restructuring is underway. One of the tribunal’s requirements is that the restructuring be completed successfully, which will allow MultiChoice to check off a number of the remaining boxes needed to finish the deal.
Furthermore, the firms have already secured third-party consents, such as MultiChoice’s funders’ approval, and additional regulatory approvals, such as those from the Prudential Authority, to carry out the reorganisation.
Phuthuma Nathi Investments, MultiChoice’s BEE shareholder, still requires a few approvals and procedures, though. Phuthuma Nathi will increase its effective stake in Orbicom from 25% to 40% as a result of the restructuring.
Additionally, MCSAH will announce an additional extraordinary dividend of R1.375 billion to its shareholders, Phuthuma Nathi and MultiChoice, of which Phuthuma Nathi will receive R343.75 million. To have enough money to purchase Class A Shares in LicenceCo, Identity Partners, Itai Consortium, and 13th Avenue must also complete their agreements with their funders.
Multichoice went on to reveal: “The effective date for the implementation of the reorganisation will occur only after all the suspensive conditions set out above have been fulfilled or waived.”
